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1. An auditor may involve another auditor to observe the inventory count or inspect
physical fixed assets at a remote location. What PSA governs the example stated
above?
A. PSA 402
B. PSA 600
C. PSA 240
D. PSA 250
2. An auditor who, at the request of the group engagement team, performs work on
financial information related to a component for the group audit.
A. Component
B. Component Auditor
C. Component management
D. Component materiality
10. Statement I: The group engagement team shall establish an overall group audit
strategy and shall develop a group audit plan in accordance with PSA 300 (Redrafted).
Statement Il: The group engagement partner shall review the overall group audit
strategy and group audit plan.
A. Both statements are true
B. Both statements are false
C. First statement is true while second statement is false.
D. First statement is false while second statement is true.
11. Statement I: The group engagement team shall evaluate the appropriateness,
completeness and accuracy of consolidation adjustments and reclassifications, and
shall evaluate whether any fraud risk factors or indicators of possible management
bias exist.
Statement Il: If the group financial statements include the financial statements of a
component with a financial reporting period-end that differs from that of the group,
the group engagement team shall evaluate whether appropriate adjustments have
been made to those financial statements in accordance with the applicable financial
reporting framework.
A. Both statements are true
B. Both statements are false
C. First statement is true while second statement is false.
D. First statement is false while second statement is true.
12. The materiality level for a component determined by the group engagement team.
A. Component
B. Component Auditor
C. Component management
D. Component materiality
14. The Philippine Standards on Auditing (PSAs) apply to group audits, This PSA deals with
special considerations that apply to group audits, in particular those that involve
component auditors.
A. PSA 402
B. PSA 600
C. PSA 240
D. PSA 250
16. In which of the following circumstances is an auditor most likely to rely on work done
by internal auditors?
A. If financial statement amounts are material and the degree of subjectivity in
evaluating the audit evidence is high.
B. If the internal auditors have concluded that the risk of material misstatement at
the overall financial level is negligible.
C. For financial statement amounts judged by the auditor to require little or no
subjectively evaluated audit evidence.
D. For financial statement amounts determined largely or entirely on the basis of
estimates made by management.
17. Internal auditing can affect the scope of the external auditor's audit of financial
statements by
A. Decreasing the external auditor's need to perform detailed tests.
B. Allowing the external auditor to limit his/her audit to substantive testing.
C. Limiting direct testing by the external auditor to assertions not directly tested by
internal auditing.
D. Eliminating the need to be on hand during the physical count of inventory.
18. The company being audited has an internal auditor that is both competent and
objective. The independent auditor wants to assign tasks for the internal auditor to
perform. Under these circumstances, the independent auditor may
A. Allow the internal auditor to perform tests of internal controls.
B. Allow the internal auditor to audit a major subsidiary of the company.
C. Not assign any task to the internal auditor because of the internal auditor's lack
of independence.
D. Allow the internal auditor to perform analytical procedures, but not be involved
with any test of details.
19. The company being audited has an internal auditor that is both competent and
objective. The independent auditor wants to assign tasks for the internal auditor to
perform. Under these circumstances, the independent auditor may
A. Allow the internal auditor to perform tests of internal controls.
B. Allow the internal auditor to audit a major subsidiary of the company.
C. Not assign any task to the internal auditor because of the internal auditor's lack
of independence.
D. Allow the internal auditor to perform analytical procedures, but not be involved
with any test of details.
20. Which of the following is a false statement about the relationship of the internal
auditor and the scope of the external audit of a company's financial statements?
A. The nature, timing, and extent of the external auditor's substantive tests may be
affected by the work of the internal auditors.
B. The internal auditors may assist the external auditor in performing substantive
tests and tests of controls under certain circumstances.
C. The external auditor is not required to give consideration to the internal audit
function beyond obtaining an understanding sufficient to identify activities
relevant to planning the audit.
D. The internal auditors may determine the extent to which audit procedures should
be employed by the external auditor.
21. Which of the following is incorrect about the working papers prepared by the auditor?
A. The auditor should record in the working papers, information on planning the
audit work, the nature, timing and extent of the audit procedures performed, the
results thereof, and the conclusions reached from the audit evidence obtained.
B. The extent of working paper documentation is a matter of professional judgment.
C. Working papers should be in the form of data stored on paper.
D. Working papers should be designed and organized to meet the circumstances and
the auditor's need for each individual audit.
22. A CPA may hire, for the CPA's public accounting firm, a non-CPA systems analyst who
specialized in developing computer systems:
A. Provided the CPA is qualified to perform each of the analyst's tasks.
B. Provided the CPA is able to supervise the analyst and evaluate the analyst's end
product.
C. Provided the analyst first passes the CPA board exams, because non-CPA
professionals are not permitted to be associated with CPA firms in public practice.
D. Provided the analyst is also qualified to perform each of the CPA's tasks.
23. In using the work of a specialist, an understanding should exist among the auditor, the
client, and the specialist as to the nature of the specialist's work. The documentation
of this understanding should cover
A. A statement that the specialist assumes no responsibility to update the specialist's
report for future events or circumstances.
B. The conditions under which a division of responsibility may be necessary.
C. The specialist's understanding of the auditor's corroborating use of the specialist's
findings.
D. The auditor's disclaimer as to whether the specialist's findings corroborate the
representations in the financial statements.
24. PSA 620, Using the Work of an Auditor's Expert, deals with
A. The auditor's use of the work of a management's expert.
B. The auditor's responsibilities regarding the use of an individual or organization's
work in a field of expertise other than accounting or auditing, when that work is
used to assist the auditor in obtaining sufficient appropriate audit evidence.
C. Situations where the engagement team includes a member with expertise in a
specialized area of accounting or auditing.
D. How the auditor's responsibility for the opinion on the entity's financial
statements will be divided between the auditor and the auditor's expert.
25. Which of the following statements concerning the auditor's use of the work of a
specialist is true?
A. If the auditor believes that the determinations made by the specialist are
unreasonable, only a qualified opinion may be expressed.
B. If the specialist is related to the client, the auditor is still permitted to use the
specialist's findings as corroborative evidence.
C. The specialist may not be related to the client.
D. The specialist is identified in the auditor's report when the auditor expressed an
unqualified opinion.
26. Which of the following statements is correct about the auditor's use of the work of a
specialist?
A. The specialist should not have an understanding of the auditor's corroborative use
of the specialist's findings.
B. The auditor is required to perform substantive procedures to verify the specialist's
assumptions and findings.
C. The client should not have an understanding of the nature of the work to be
performed by the specialist.
D. The auditor should obtain an understanding of the methods and assumptions
used by the specialist.
27. A dual dated report contains the dates of a subsequent event and the date the:
A. Auditor completed work in the client's office
B. Subsequent event was resolved
C. Financial statements were prepared
D. Audit report was delivered
28. A measure of uniformity in the form and content of the auditor's report is desirable
because
A. It helps the auditors avoid legal liability.
B. It helps the readers understand the report.
C. It helps the auditor identify the usual circumstances that are expected to occur.
D. It makes the auditors more informed of their responsibilities with respect to audit
report.
29. After issuing a report, an auditor has no longer obligation to make continuing inquiries
or perform other procedures concerning the audited financial statements, unless
A. Management of the entity requests the auditor to reissue the auditor's report.
B. Information about an event that occurred after the end of fieldwork comes to the
auditor's attention.
C. Information, which existed at the report date and may affect the report, comes to
the auditor's attention.
D. Final determinations or resolutions are made of contingencies that had been
disclosed in the financial statements.
ANSWER KEY:
1. B 11. A 21. C
2. B 12. D 22. B
3. C 13. D 23. C
4. C 14. B 24. B
5. A 15. D 25. B
6. A 16. C 26. D
7. A 17. A 27. A
8. A 18. A 28. B
9. A 19. A 29. C
10. A 20. D 30. B